WASHINGTON - The Supreme Court sided with eBay in a patent fight over a selling feature Monday, in a ruling that will make it easier for high-tech companies to avoid court injunctions in such disputes.

Justices, in a unanimous opinion, said that judges have flexibility before they impose court orders barring continued use of a technology after juries find a patent violation. They must consider several factors, the court said.

The decision threw out a ruling by a federal appeals court that said injunctions should be automatic unless there are exceptional circumstances.

The case had been closely watched by businesses of all types.

High-tech companies said that they needed protection from "patent trolls," small companies that sue larger firms over ideas they have never developed into products. Drug and biotechnology companies argued that court injunctions were needed to shield their ideas and recoup costs of their investments.

The fight centered on eBay's fixed-price purchase option, which allows buyers to purchase items without bidding.

MercExchange, a small Virginia company, sought an injunction to prevent eBay from using the technology. The company's founder, patent lawyer Thomas Woolston, had come up with the idea of using an electronic network of consignment stores that would ensure legitimacy of sales by taking possession of the goods being offered.

A jury had sided with MercExchange, finding that its patent had been infringed, and awarded the patent-holder $35 million. A trial judge later reduced the award by $5.5 million. The Supreme Court ruling does not affect the judgment against eBay.

An appeals court said that MercExchange was entitled to an injunction. But eBay and other high-tech companies had told the Supreme Court that patent-holding companies could use the threat of court injunctions to coerce larger firms into settling lawsuits for huge sums of money.

In a brief opinion, Justice Clarence Thomas said that neither the district court nor appeals court that had considered the eBay case "fairly applied ... traditional equitable principles" in deciding MercExchange's motion for a permanent injunction.

A judge must now consider whether an injunction is appropriate in the case.

MercExchange said in a statement that it was confident it would again win an injunction, noting that the high court rejected the notion that injunctions were not appropriate for patent owners willing to license their patents and use them commercially.

Although the decision was unanimous, some justices wrote to explain their votes.

Chief Justice John Roberts wrote an opinion that was joined by Justices Antonin Scalia and Ruth Bader Ginsburg. Justice Anthony M. Kennedy wrote an opinion that was joined by Justices John Paul Stevens, David Souter and Stephen Breyer.

"On March 6, 2006, the U.S. Supreme Court upheld this law in a unanimous decision. Chief Justice John Roberts wrote 'A military recruiter's mere presence on campus does not violate a law school's right to associate, regardless of how repugnant the law school considers the recruiter's message'".

I like the eBay decision, though; on the whole, judicial discretion is a good thing.

Logged

I must admit that I may have been infected with society's prejudices and predilections and attributed them to God . . . and that in years hence I may be seen as someone who was on the wrong side of history. I don't believe such doubts make me a bad Christian. I believe they make me human . . .

First, unanimous decisions aren't rare. In fact, they decide a lot of cases they hear by unanimity and consensus (these are the easy cases; you know, the ones no one in the press ever really reports on or cares about?).

Second, it seems silly to say that preliminary injunctions should be eliminated for "weak patents" considering that a threshold question for the issuing of ANY preliminary injunction is whether the movant is likely to ultimately prevail; if the probability is low, then the movant must demonstrate a considerable degree of irreperable harm to get the injunction. The short of it is that, in most cases, if it really is a weak patent claim, you're not likely to get the injunction anyway. So I don't think it helps at all to say that the court should "overturn the preliminary injunction doctrine altogether for weak patents." There's too much circularity to this, since you have to decide whether it IS a weak patent in the first place; it doesn't really get us anywhere. It's like saying we shouldn't make defendants pay damages if they're not liable.

First, unanimous decisions aren't rare. In fact, they decide a lot of cases they hear by unanimity and consensus (these are the easy cases; you know, the ones no one in the press ever really reports on or cares about?).

Second, it seems silly to say that preliminary injunctions should be eliminated for "weak patents" considering that a threshold question for the issuing of ANY preliminary injunction is whether the movant is likely to ultimately prevail; if the probability is low, then the movant must demonstrate a considerable degree of irreperable harm to get the injunction. The short of it is that, in most cases, if it really is a weak patent claim, you're not likely to get the injunction anyway. So I don't think it helps at all to say that the court should "overturn the preliminary injunction doctrine altogether for weak patents." There's too much circularity to this, since you have to decide whether it IS a weak patent in the first place; it doesn't really get us anywhere. It's like saying we shouldn't make defendants pay damages if they're not liable.

but the preliminary injunction basically is making a defendant pay damages even before proven guilty. there are too many bad patents already out there, and preliminary injunctions act like blackmail for patent trolls.

My point is that the weakness of the patent claim is already a threshold issue that has to be taken into account when deciding whether the preliminary injunction shall issue or not; so it's highly circular to say say that they shouldn't apply to weak claims. And how does an injunction make them "pay damages"? These are completely different remedies. Certainly the injunction can cause quite a bit of economic harm (as in they putative infringer against whom the injunction is issued may not be able to carry on their business anymore), but it's not the same thing as making them pay damages.

Wow. It appears I've gotten sidetracked by the argument over preliminary injunctions, when this case doesn't even deal with that at all. It deals with permanent injunctions. And for that reason, I expect this result will be QUITE controversial amongst property (and IP) law commentators. There are very strong arguments on both sides here.

No, still not the same thing, even economically speaking. When a defendant is made to pay damages, the plaintiff reaps the benefit of those damages. When a defendant is made to shut down due to an injunction, the plaintiff isn't necessarily paid anything; the defendant merely suffers potentially grievous economic loss. Damages and injunctions are very different remedies, with different standards and consequences that go with them. You can get either one, or even both in some cases.

Preliminary injunctions often end the case as a practical matter, but theoretically this isn't necessarily so.

And I repeat, this particular case was about a permanent injunction and whether the plaintiff should be able to get one automatically after they had already prevailed (i.e., a jury has looked at the best evidence and arguments that both sides could muster, and decided that the plaintiff owned a valid patent which had been infringed). I'm not sure this will have much effect whatever on preliminary injunction, or the readiness of federal courts to issue permanent injunctions as a remedy for patent infringements, since injunctions are the primary means by which we protect property (and IP) rights in our legal system. As one concurring opinion notes, historically, injunctions have almost always issued in cases of patent infringements, as for other kinds of property rights violations, and it seems unlikely that this will change, since the same dispositive facts will appear in virtually every case.